The Reasons Physicians Fail to Build Wealth

f you have physician clients or family or friends, you’re in on a dirty little secret: physicians’ high incomes do not reliably translate to high net worth.

Practicing physicians earn top dollars. In fact, according to the U.S.Bureau of Labor Statistics, nine of the top ten earners in the U.S. call themselves “doctor.”

Indirect evidence supports the assertion that physicians fail to build wealth. In a recent survey, half of physicians are behind where they would like to be in retirement planning. Professional medical associations are exploring how to asses competency in older physicians who continue to practice medicine because they cannot afford to retire.

What keeps physicians from building wealth? Here are the reasons usually cited:

Medical school debt

Late start on earning and savings

Failure to protect assets against know and overlooked risks

Poor tax planning

Getting investment advice from the wrong people

Fraud and theft.

This is like saying people are overweight because they eat too many donuts. It may be true, but it fails to tell the whole story.

Further it fails to lead to sustained solutions that deliver different outcomes. Budgets work about as well as diets.

The Real Causes of Unrealized Wealth

I believe that physicians’ failure to build wealth is a symptom of a deeper financial ill: their dysfunctional relationship with money.

Physicians as a group are intelligent people who:

Tend to overestimate their ability to manage money, and underestimate the level of difficulty of the challenge.

Lack insight about what they do and do not know.

Turn to money to solve non-financial problems, like alleviating their their guilt about spending so little time with their families.

The barrier to change comes down to a conspiracy of silence around money. For physicians, money is the ultimate taboo topic. You cannot fix problems that you cannot talk about.

Here are three reasons physicians avoid conversations about money:

The culture of medicine. Just as the government calls for the separation of church and state, medical ethics calls for a separation between the care a patient gets and a patient’s ability to pay. We physicians learn to avoid conversations about money to uphold this ethic. As a practicing physician I often thought that delivering medical services was like ordering a meal off of a restaurant menu without any prices. Small wonder health care costs spiraled out of control!

Lack of formal education. Physicians get no courses in business or financial management in medical school or in residency. Further, mastering exploding volumes of medical information takes priority over learning about how to build wealth.

Awareness of their vulnerability. Physicians experience themselves as financial prey. They turn to people they trust and attempt to avoid disclosing their financial vulnerability. One advisor says her major job is “protecting her doctors from DDD’s”–dumb doctor deals.

The Path to Wealth

Physicians have the ability to build wealth.

As Einstein says, problems are not solved on the level at which they are created. The solution begins with physicians’ willingness to tolerate the discomfort when discussing money.

1. Coach physicians to have conversations with loan oficers when they take out medical school loans, with patients about the costs of medical care and with financial advisors about what it means to thrive.

“I deserve nice things.” Physicians and their families make tremendous sacrifices to answer this call to medical service. When physicians finally start earning their 6-figure incomes, they feel that it’s time to splurge.

“I can save lives and I’m smart; that means I can manage my own money.” This is the physician who fails to know how much he or she does not know about money.

“There will always be more than enough money.” This physician fails to plan, trusting that there will be a bright financial future. Without a plan, money tends to wander off.

“You invested in a marijuana farm with a 200% return? Count me in!” Physicians can follow people they trust into marginal investments.

“Look at me!” This physician wants to maintain the appearance of success at the cost of building true wealth.

Vicki Rackner MD works with physicians who want to thrive in the era of Obamacare and thefinancial advisors who help them get there. This author, speaker and consultant offers a bridge between the world of medicine and the world of business. Contact her at (425) 451-3777. Click here to get a complimentary special report about the financial lives of physicians.